Seoul to invest over $4 bn in materials to cut off reliance on Japanese supply chain

2019-08-28

Sohn Il-seon and Kim Hyo-jin

South Korea will spend 5 trillion won ($4.12 billion) over the next three years to back research on core components and materials to accelerate tech self-sufficiency in the face of Japan's export restrictions.

The Ministry of Science and ICT in a ministerial meeting Wednesday approved a policy strategy to cope with Tokyo's trade barriers and build up Korea's capabilities in high-tech components, materials and equipment.

On Wednesday, Korea was effectively dropped from Japan's fast-track export list, a move that could potentially delay shipments of more than a thousand items deemed strategically sensitive. This follows Tokyo's export curbs targeting Seoul last month on three materials critical for producing semiconductors and display screens, Korea's key export items. Japan is responsible for 70 to 90 percent of the world production of the three chemicals.

Prime Minister Lee Nak-yon, who chaired the Wednesday meeting, said the government will carry out the policy initiative to wean Korea off a certain country or market for supplies and trade.

He also said the government is readying to bring a suit against Japan's unfair trade practices at the World Trade Organization (WTO).

Korea relies heavily on its Asian neighbor for critical tech components, materials and equipment to keep up its technological edge in manufacturing. It has never once recorded a trade surplus with Japan since the two countries normalized ties in 1965.

Seoul plans to ramp up investment in more than 100 items designated as core sectors. Starting with 1 trillion won this year, it intends to pour in more than 5 trillion won from 2020 to 2022.

The core areas subject to special subsidy and attention will be exempted from budget cuts and sunset provisions. The preliminary feasibility study on more urgent items would also be simplified to speed up the evaluation process.

The government plans to offer customized assistance to different sectors. For those with already a high level of development, investment would focus more on taking the technology global if the import sources can be easily diversified. If not, suppliers and customers would be encouraged to work together to commercialize the technology.

A special committee would be installed under the Presidential Advisory Council on Science & Technology to oversee the management of the core items and formulate policies for their research and development.

Officials also plan to set up an independent research center, temporarily dubbed N-LAB, to foster university-industry-government partnerships. This would include testbed facilities to conduct tests for the commercialization of materials and components. They also agreed to build a production unit to manufacture 12-inch wafers at National Nanofab Center under Korea Advanced Institute of Science and Technology, the country's leading science and tech university.